Get out and Vote!

The day to vote is finally here. Hopefully we get a good turnout today, whatever the outcome.  There are almost 400 million people around the EU who have been excluded from a vote and there are also thousands of Irish all around the world who this treaty will affect when/if they come home and they won’t get a say either, I’m one of them.

I’ve read through the full Fiscal Compact Treaty and the ESM Treaty and I’ve drawn my own conclusions about the issues involved.

There has been a lot of noise and fear coming from both the YES and NO camps, but I believe people voting today are voting for or against the treaty based on these two issues:

 

• The risk of not having access to further funds in the event that we need them in the future; and
• The risk of handing over a large proportion of our self determination and democracy to Europe.

It’s been clearly established that the economics of the treaty do nothing to address the causes of the crisis and won’t prevent another one. Therefore, people are essentially voting on which of the two scenarios are less risky.

While I believe the scenario of not having access to ESM funds has been fashioned deliberately to coerce a YES vote, the risk is there nonetheless. We may not get access to this funding. We may have to go to the markets and seek a loan at higher interest rates. However, I believe it is highly unlikely that the EU, ECB and IMF would let us fall. They need Ireland to be able to pay back their loans in order to save the European banking system. I’ve covered this in yesterday’s blog.

The second risk is to hand over another proportion of our democracy, sovereignty and self-determination. The articles in the treaty clearly illustrate the penalties that can be imposed on us and how ‘partnership programmes’ can be forced upon a country if they’re not meeting targets. We’d do well to remember that the last partnership programme forced our government to cut the minimum wage, introduce the household tax and pay back unsecured, unguaranteed bondholders billions of Euro.

Let’s face facts; we’re a small fish in a big pond to the EU and the other countries in it. Angela Merkel and Nicholas Sarkosy had no accountability to Irish voters in 2010 when they decided to load the European banking debt onto Irish taxpayers. They did so to preserve their own people from suffering because that is who they are supposed to represent - they have no allegiance to us.

This is entirely likely to happen again, maybe not to us, but to future generations of Irish people. Also, if we do need another bailout from the ESM in 2014, you can be certain it will come with more strings attached.

For me, I understand the risks involved. I also understand that people are genuinely afraid of where we’ll get the money from if we vote no. This has been a travesty of Irish politics - fear has been deliberately used to influence one of the most important decisions in Irish history.

I know that it’s not as easy as writing NO for some people because the risks involved are so enormous. However, I believe the risks of voting YES are substantially higher. We can vote YES for the sake of cheap credit for the next few years, but can we really trust unelected, unaccountable people to look after the interests of Irish people in the future, particularly when they have such a shoddy track record.

I believe that credit will be given to Irish people if we vote no. I also believe that our hard fought for sovereignty and democracy is too precious to be diluted any further. I would vote NO. 

"In a democracy the poor will have more power than the rich, because there are more of them, and the will of the majority is supreme." Aristotle

Why won’t the government allow a real democratic vote?

You may remember back in February, a German Minister Michael Link declared that this treaty was being designed so that the Irish people would not get a vote on it.

It was only under the threat of a legal challenge that the government sought advice from the attorney general, who then advised that a referendum should be put to the people.

When it was realized that a referendum would be needed in Ireland, we had the introduction of the “blackmail clause” (March 2012). This says that unless you ratify the treaty you will not have access to any funding from the European Stability Mechanism (ESM). A clause that is genuinely frightening to those who are working hard to stay above the breadline and pay their mortgages, particularly low paid public servants. They’re rightly concerned about where the funding will come from if we vote no.

Let’s not forget that until a referendum was declared, the government insisted that no future bailout would be needed. Suddenly we may need one and in order to get it, we must sign up to this treaty.

Lets talk briefly about the merits of the treaty though. Many prominent economists are recommending a no vote. If the blackmail clause were not included, an even larger proportion of economists would not recommend the treaty. They have stated that this is a bad economic treaty, however, ‘on the balance of it’, they are recommending a yes vote because, apparently, it is the only way we know where future funding will come from.

Earlier this month, our Minister for Finance, Michael Noonan threatened the people saying that if there is a no vote, his budget in December would be a lot harsher on the Irish people.

We also have the undemocratic decision to hold the vote on a Thursday, again, when it is well known that this disenfranchises students, young people and those commuting to work – possibly from the UK.

*from the Irish Times

 

It is these exact people who have been affected most by the austerity measures put in place to date. They are also the people who will be affected most by the treaty in the future.

It is clear there is a link between this treaty and the policies of the past: The establishment are determined to do whatever they can to achieve their agenda - so to hell with democracy.

If they trusted the Irish people, if they believed in real democracy, if they really thought this was a good treaty for Ireland’s people, they would withdraw all the threats, hold the referendum on a day that suits the majority of the public and remove the blackmail clause.

They would explain how the contents were good for the people of Ireland and the EU, not just now, but into the future and refrain from frightening people into voting yes with the ‘gun to the head’ clause of the ESM.

Remember, we all have a responsibility to future Irish generations. Even if this is a good treaty for the next year or two but will be bad in the long run - we must vote no. Iceland put its children first and defaulted on the debt of the bankers so that their children won’t be paying debts in 20 years time. They have not passed on their bad legacy, but we have. Lets not do it again.

It’s not easy to get the toothpaste back in the tube! They should let this ‘economic treaty’ stand on its own merits.

Voting YES to this treaty will enable/force Ireland to participate in the ESM

If Ireland votes YES to this treaty, it will mean that we are participating in the ESM. This has been portrayed as a good thing in the event we need a future bailout. However, the ESM is a different treaty, hidden behind the one you are being asked to vote on. The reason it’s being hidden is clear when you look at the details included in it.

Firstly, Ireland will have an initial liability of over €11.1 billion to pay into the ESM. This can be increased on request by the ESM at any point and we’ll have 7 days to pay up. So what we’re doing here is borrowing money, at 3%, to put into a bailout mechanism that may or may not give us a loan in future. It has been argued that this bailout fund, at €700,000,000 will not be enough, particularly with Spain in severe trouble. So if they need a bailout, and we’ve put 11billion in, they may not have enough to give Ireland anything.

Then you have to look at the clauses in the treaty. This video will give you an idea of how dangerous participation in the ESM actually is.

In Ireland, and throughout Europe, nobody has been held accountable for the crisis we are in. The immunity clauses illustrate that that will continue in perpetuity.

Click here to read the full ESM treaty or see below for some of the clauses.

ARTICLE 9

Capital calls

The Board of Governors may call in authorised unpaid capital at any time and set an appropriate period of time for its payment by the ESM Members.

ARTICLE 32

Legal status, privileges and immunities

1. To enable the ESM to fulfil its purpose, the legal status and the privileges and immunities set out in this Article shall be accorded to the ESM in the territory of each ESM Member. The ESM shall endeavour to obtain recognition of its legal status and of its privileges and immunities in other territories in which it performs functions or holds assets.

2. The ESM shall have full legal personality; it shall have full legal capacity to:

(a) acquire and dispose of movable and immovable property;

(b) contract;

(c) be a party to legal proceedings; and

(d) enter into a headquarter agreement and/or protocols as necessary for ensuring that its legal status and its privileges and immunities are recognised and enforced.

3. The ESM, its property, funding and assets, wherever located and by whomsoever held, shall enjoy immunity from every form of judicial process except to the extent that the ESM expressly waives its immunity for the purpose of any proceedings or by the terms of any contract, including the documentation of the funding instruments.

4. The property, funding and assets of the ESM shall, wherever located and by whomsoever held, be immune from search, requisition, confiscation, expropriation or any other form of seizure, taking or foreclosure by executive, judicial, administrative or legislative action.

5. The archives of the ESM and all documents belonging to the ESM or held by it, shall be inviolable. T/ESM 2012/en 47

6. The premises of the ESM shall be inviolable.

7. The official communications of the ESM shall be accorded by each ESM Member and by each state which has recognised the legal status and the privileges and immunities of the ESM, the same treatment as it accords to the official communications of an ESM Member.

8. To the extent necessary to carry out the activities provided for in this Treaty, all property, funding and assets of the ESM shall be free from restrictions, regulations, controls and moratoria of any nature.

9. The ESM shall be exempted from any requirement to be authorised or licensed as a credit institution, investment services provider or other authorised licensed or regulated entity under the laws of each ESM Member.

ARTICLE 33

Staff of the ESM

The Board of Directors shall lay down the conditions of employment of the Managing Director and other staff of the ESM. T/ESM 2012/en 48

ARTICLE 34

Professional secrecy

The Members or former Members of the Board of Governors and of the Board of Directors and any other persons who work or have worked for or in connection with the ESM shall not disclose information that is subject to professional secrecy. They shall be required, even after their duties have ceased, not to disclose information of the kind covered by the obligation of professional secrecy.

ARTICLE 35

Immunities of persons

In the interest of the ESM, the Chairperson of the Board of Governors, Governors, alternate Governors, Directors, alternate Directors, as well as the Managing Director and other staff members shall be immune from legal proceedings with respect to acts performed by them in their official capacity and shall enjoy inviolability in respect of their official papers and documents.

What will happen if we vote no?

This is not clear. Nobody seems to know because the government says it doesn’t have a plan B. Actually, they proudly state that there is no plan B (Pascal Donoghue on VB, 17/05/2012). They say a no vote is a vote for “uncertainty”. They claim to have no idea where the funding will come from. They say the onus is on the no side to come up with alternative funding. I disagree.

These politicians were elected by the Irish people to represent their best interests. Labour and Fine Gael on the yes side are the government. They are the ones who can officially approach the IMF, China or any other country to establish if we could get a loan and at what rate (in the event we need one). Instead, it appears they have obstructed the public receiving information on whether we can get a loan from the IMF.

Only six months ago the government stated that another bailout would not be needed and just recently, our Minister for Finance said Ireland was in a much better position than 12 months ago. So why would we need another bailout from the ESM in the coming years?

At the moment, the Irish YES side are pinning all their hopes for future bailouts on the ESM and are portraying the IMF as a loan shark. However, during the first bailout in 2010, it was our European ‘partners’ who forced €40-60 billion of unguaranteed, unsecured bondholder debt onto Irish taxpayers. They insisted we could not burn these bondholders and have never answered our questions as to why this was a requirement.

It was actually the IMF who said they have “no objection to Ireland enforcing losses on the senior unsecured bondholders of its banks.” So, if the loan had come from the IMF alone, and our European partners were not involved, Irish taxpayers would be at least €40 billion better off. We also would not have to pay the high rate of interest on any of this “bailout” (Our European partners are generously charging us interest for the privilege of rescuing the entire European banking system).

If I were in charge of a large corporation and told shareholders that we needed a loan by informing them; “We won’t be shopping around to get the best deal, we’ll just go with the bank that ripped us off the last time.” I’m pretty sure I’d be fired, and rightly so. So why haven’t our politicians shopped around for the best deal and informed us of what’s on offer?

If the government really believes in this treaty, but also believes in the democratic will of the Irish people, they should be seeking figures from other lending bodies to establish where we can obtain funding in the event of a no vote – and at what rate. Then we could vote on the actual contents of the treaty, freely and without fearing where we could get future funding (if needed).

There is also the argument put forward by the Nevin Economic Research Institute that:

‘There appears to be a strong case for continuing support under the Economic Financial Stability Facility (EFSF) until Ireland regains access to capital markets based on a statement of the Heads of Government in July 2011:

“We are determined to continue to provide support to countries under programmes until they have regained market access, provided they successfully implement those programmes. We welcome Ireland and Portugal's resolve to strictly implement their programmes and reiterate our strong commitment to the success of these programmes.”

A second assurance was issued on 30th January 2012 after the Fiscal Compact was agreed and after the ESM clause was inserted into the Preamble of same:

“We welcome the latest positive reviews of the Irish and Portuguese programmes which concluded that quantitative performance criteria and structural benchmarks have been met. We will continue to provide support to countries under a programme until they have regained market access, provided they successfully implement their programmes.”

This could be interpreted to mean that the current funding programme can be extended and financed under the ESM itself – because it would not be regarded as ‘new’. It is merely a continuation of support – support that the EU leaders have already guaranteed.

Also, if we vote no, it is entirely possible that we could get a second vote – as declared by Minister Richard Bruton. This second vote may include better terms and conditions for Ireland. Everybody’s talking about growth but the real necessity for Irish people is debt forgiveness. Yes, we need growth, but debt forgiveness (it’s strange to say forgiveness when it was never our debt to begin with) would free up money to invest in infrastructure development and jobs, helping to create growth.

The ICTU has called for a growth package of about €15 billion to create jobs. Imagine what we could have done with another €40-60 billion in the public purse. Greece received a massive debt forgiveness package of about 50%, so why can’t the Irish?

The government has already said that a second vote is definitely not a possibility, but just how credible is that. Lets look at previous statements by a member of this government in relation to the Lisbon referendum:

“I don't think there's any question of this Treaty being put a second time to the people” - Eamon Gilmore, RTE Six One News on 13/6/08 in relation to the Lisbon Treaty.

“People have made a decision. The Lisbon Treaty cannot now be ratified. And I think that the decision that has been made by the Irish people has got to be respected by everybody. Got to be respected by the Taoiseach, by the Government, by the other Member States, by the political leadership in Brussels” - Eamon Gilmore RTE SixOne News.

Then Wikileaks told us the following: 

Tanaiste Eamon Gilmore privately told US diplomats he would support the holding of a second referendum on the Lisbon Treaty -- despite publicly saying the opposite, a leaked embassy cable reveals.

"Gilmore, who has led calls against a second referendum, has told the embassy separately that he fully expects, and would support, holding a second referendum in 2009. He explained his public posture of opposition to a second referendum as 'politically necessary' for the time being," the Ambassador said in a 'confidential' dispatch sent to his colleagues in Washington and across the EU.

So how can we expect the leaders of our country to tell us the truth when the second most powerful man in the country has this track record on EU treaties?

Either way, even if we vote no and do not get a second vote, and if we cannot obtain funding from other avenues, it is highly unlikely that the EU, ECB and the IMF would not give us the funding for a possible future bailout. Particularly when they are so complimentary of Ireland achieving the targets they have laid down for us.

Vincent Brown describes the chances of this eventuality as ‘minimal’. They cannot risk us defaulting on our banking debts – particularly while they are already under so much pressure from the Greek situation. After all, we’re borrowing money off them to pay back their banks.

If this treaty doesn't address the crisis, what will it do?

Now that we've established that the main economic aspects of this treaty would not have prevented the current economic crisis, and are unlikely to prevent one happening again, what does this treaty actually do?

This treaty has several other provisions, which can be looked at in isolation:

Article 3 states that if economic targets are not met, “a correction mechanism shall be triggered automatically.”

So if we don’t meet these targets and go by the economic policies of our current and past government, as well as the Troika – Then the automatic correction mechanism will be austerity rather than a stimulus packages. For example, since the global financial crisis the Australian Government has run a deficit in order to continue investing in the economy and it’s people. The result? No recession and at 4.9% it has one of the lowest unemployment rates of any western economy (It has also returned to surplus in 2012).

Under Article 8, if the aforementioned targets are not met the treaty allows the European Court of Justice (ECJ) to impose fines of up to 0.1% of a member state’s GDP. In Ireland’s case this would be approximately €155 million based on 2011 GDP figures.

Similarly Article 5 imposes another penalty - if a country is in breach of the economic targets, it may be forced into an “economic partnership programme”. This would be similar to the existing Troika programme, which has forced Irish governments to implement the regressive household tax, cuts to the minimum wage and the future imposition of a water charge.

As the YES campaign points out, all the economic aspects of the treaty are already in existence. This treaty will just cement them into law and add penalties. Article 3, 5 and 8 are central to this and allow undemocratic, unelected, external organisations to become involved in the fiscal decisions of Ireland. Throughout the crisis, EU leaders have continually decided to place the burden onto the shoulders of Irish taxpayers. Do you trust these very people to have more authority and powers over our state?

If this treaty had already been in existence during the past 10 years, the likely impacts Ireland would have experienced differently would have been:

·       The automatic implementation of austerity measures on ordinary working people and their families;

·       When the austerity didn’t work, as it clearly hasn’t, we would have received a €155 million fine;

·       Finally, we would have had a quicker loss of sovereignty to unelected, undemocratic bureaucrats because the ‘partnership procedure’ doesn’t require a bailout situation. The EU can come in and make changes to a society if a country is in consistent deficit.

Would the economic provisions in the Fiscal Treaty have prevented Ireland’s current financial crisis?

The answer to this is no. The main economic provisions in the treaty state:

“The budgetary position of the general government shall be balanced or in surplus.”

The Irish government actually upheld this budgetary position in the run up to the economic crisis. According to the IMF, between 2000 and 2007 (other than a -0.312% deficit in 2002) the government held a surplus in six out of seven years. In fact, the Centre for Economic and Policy Research specifically says that Ireland was a model of fiscal responsibility in the years leading up to its current disaster.

Not only does the treaty state that budgets must be balanced or in surplus, it states that the structural deficit cannot be higher than 0.5 %. Again, Ireland achieved this target in 2000, 2001, 2004, 2005, 2006, 2007.

 

The treaty then requires the debt to GDP ratio to be set below 60%. Again, this was achieved in Ireland in the run up to the economic crisis. In fact, Ireland has had a debt to GDP ratio below 60% since 1996 with year on year reductions, unlike countries such as Germany and France.

From the above two charts, you'll notice that Ireland had a near perfect record in the run up to the financial crisis.

The rules outlined in this Fiscal Treaty do nothing to address the causes of the Irish crisis. If we look at what did cause the crisis, then we will see why.

Ireland (and much of Europe) finds itself in this difficult position because private debt has been placed on taxpayers shoulders - you'll notice this from around the year 2008 in the above charts.

A large portion of this debt was derived from the property bubble, which was compounded by the German and French economies. Both were struggling during the early to mid 2000’s, and consequently demanded that the European Central Bank (ECB) keep interest rates low. This made credit available at a very cheap rate.

People throughout Europe could now borrow more and buy more - and that’s exactly what happened in Ireland. The increased demand for property in the Irish market saw developers inflate prices way beyond what they were actually worth.

On top of this, the implementation of pro-cyclical fiscal policies by previous governments made matters even worse. Prudent governments should increase taxes during a ‘boom’ and save for a rainy day so they can invest and create growth again. But the Irish Government lowered taxes and increased spending during the ‘boom’. They became over-reliant on income from the property industry and when it inevitably crashed, we were left with a massive hole in the public finances -  The state just couldn’t take in enough revenue through taxes to pay our everyday costs.

This new reality was then used by the Troika (particularly the ECB) to threaten the Irish taxpayer into paying back unguaranteed, unsecured bondholders in European banks (who had taken a risk on Irish banks like Anglo) or face the risk of default and the collapse of the entire economy. Essentially – we’ll only bail you out on condition you bail out the bondholders.

This treaty does nothing to prevent another crisis from happening, because it in no way addresses the causes of the current one. In fact, the economic clauses in this treaty are a pat on the back to the reckless economic policies of previous Irish governments and the lack of regulation in the banking sector across Europe. If the EU and the established political parties genuinely wanted to prevent a further crisis, they should have prepared a treaty that would prevent pro-cyclical policies and encourage counter-cyclical (you must raise taxes during a boom). Instead, this treaty encourages the exact opposite and calls for more of the same.

To date, the main arguments in favour of the treaty have been, “this is about responsible budgeting and good housekeeping” or this treaty is there to “prevent another crisis” and create “stability.” The above statistics prove conclusively that this is untrue. The use of the word stability by the government and the YES side is simply about using language to influence voters.

So if the provisions in this treaty don't address the problem, just what does it do?